Is This Pfizer's Next Mega-Blockbuster Cancer Drug?

Now that Pfizerhas (NYSE: PFE) decided to call off its proposed split, all eyes are squarely focused on the pharma giant's growth prospects as a single entity. The good news is that Pfizer is forecast to post modest single-digit top-line growth next year, and this estimate doesn't account for the drugmaker's recent acquisition of Medivation, which brings the mega-blockbuster prostate cancer drug Xtandi into the fold.

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Longer term, however, Pfizer still faces several challenges with the so-called patent cliff, as its top-selling nerve pain treatment Lyrica is set to lose exclusivity within the U.S. in 2018. And that's where the drugmaker's clinical pipeline needs to pick up the slack.

Pfizer's breast cancer drug Ibrance is expected to eventually haul in close to $5 billion in peak sales. And Medivation's Xtandi is forecast to pull in a similar figure at around $4.8 billion by 2020. Taken together, these two products should provide Pfizer with two of the best-selling cancer drugs in the world within the next three to four years.

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Perhaps as a direct consequence of the ravages of the patent cliff, however, Pfizer isn't content to simply ride these two mega-blockbusters to middling levels of growth. Instead, Pfizer formed a global strategic alliance with Merck KGaA (NASDAQOTH: MKGAY) nearly two years ago to initially develop theimmuno-oncology compound avelumab across a wide diversity of malignancies.

If avelumab can perform as expected in the clinic, Pfizer should subsequently sport three mega-blockbuster oncology products. Peak sales are in the neighborhood of $4 billion to $6 billion, and even though Merck KGaA has claim to the majority of sales, this experimental cancer drug could eventually help to propel Pfizer into the upper echelons of revenue growth within its peer group.

Pfizer and Merck KGaA have launched avelumab into a broad array of clinical studies known as JAVELIN -- both as a monotherapy and as part of a combination treatment for more than 15 tumor types:.

What's next?

The fate of one of avelumab's most valuable indications -- first line non-small cell lung cancer -- should be known by the fourth quarter of 2017. That means that Pfizer's fledgling immuno-oncology franchise could get its first real test in the regulatory arena -- and perhaps this increasingly crowded market, as well -- in 2018. If so, avelumab could serve as an important buffer against the looming generic threat to Lyrica, which currently is one of Pfizer's most important revenue drivers but it set to lose it's main U.S. patent protection in 2018.

The downside risk, though, is that some of these immuno-oncology drugs haven't performed quite up to specacross their entire clinical program, despite encouraging results in earlier studies. So while the idea of Pfizer sporting three mega-blockbuster cancer drugs is certainly intriguing from a top-line perspective, investors shouldn't count their chickens before they hatch. Pfizer's strong dividend program, healthy cash flows, and maturing late-stage clinical pipeline as a whole, by contrast, are perhaps better reasons to buy or hold this pharma stock right now.

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